Business Process Outsourcing


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  • GCP is a key component of TCS Strategy to deliver “High Value” to our Customers 1) GCP is a Key Growth Engine and is one the Six Business areas of TCS chartered to deliver the High Value Niche solutions 2) In order to propel TCS towards its vision of Top 10 by 2010, TCS has been focusing on key growth engines in addition to our traditional IT solutions and services space. One of them is GCP 3) While the IT Solutions space is growing at 25 to 30% YoY, the other Growth Engines are seeing very robust growth
  • The choice of service to focus on is determined by two key questions: Which processes is the customer most likely to outsource to a start-up third-party vendor? These are determined by taking into account the technical feasibility of and the psychological risk in offshoring. While technical feasibility determines the viability of offshoring a process, psychological risk defines the customer ’ s willingness to do so to a third-party vendor. What capabilities/ prior experience does the start-up have in order to pursue these opportunities? It is essential to understand where the start-up can add value. A clear articulation of the value proposition will enhance customer confidence in offshoring processes to the start-up. Thinking through these two sets of questions will enable the vendors to target the customers with the optimal service offering and robust value proposition.
  • Business Process Outsourcing

    1. 1. Business Process Outsourcing Presented by Ravi Ranjan
    2. 2. Agenda <ul><li>Introduction </li></ul><ul><li>History </li></ul><ul><li>Present Scenario </li></ul><ul><li>Future Growth </li></ul><ul><li>Competitors </li></ul><ul><li>Availability of Factors of Production </li></ul><ul><li>Location </li></ul><ul><li>Govt. & Taxation Policy </li></ul><ul><li>Project Outlay </li></ul>
    3. 3. Introduction <ul><li>Business Process Outsourcing </li></ul><ul><ul><li>The transfer of management and execution of an entire business process to an external service provider, including technology, people, and process. In engaging BPO services, clients are buying access to executed business processes and business outcomes from their BPO providers. (IDC) </li></ul></ul><ul><ul><li>The delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics. (Gartner) </li></ul></ul><ul><ul><li>The transfer of a function previously performed (or considered to be performed) in-house to an outside provider. </li></ul></ul><ul><li>Nearshore Sourcing: sourcing services from geographies within close proximity to the location in which the services are consumed or contracted. </li></ul>
    4. 4. <ul><li>Offshore Sourcing: sourcing services from geographies at a considerable distance from the location in which the services ar consumed or contracted. </li></ul><ul><li>Global sourcing: a corporate sourcing strategy that identifies and leverages those human resources and assets, regardless of geographic location, most appropriate for meeting the organization’s needs, often coming from both nearshore and offshore locations. </li></ul><ul><li>Insourcing : sourcing services internally as opposed to through a third-party BPO provider. Often provided in a a centralized shared services environment. </li></ul>
    5. 5. <ul><li>World War II </li></ul><ul><ul><li>Increased international trade </li></ul></ul><ul><li>1960s – 1980s </li></ul><ul><ul><li>Importing turns to outsourcing </li></ul></ul><ul><li>1990s – Present </li></ul><ul><ul><li>Services now outsourced </li></ul></ul><ul><ul><li>BPO begins </li></ul></ul>History
    6. 6. Services Globalization: The New Paradigm Digitization and Telecommunication enabling this reality
    7. 7. Three Strategic Sourcing Questions If the answer to each of these questions is YES then the company should own the operation or asset otherwise, OUTSOURCE. Strategy Does the operation or asset directly contribute to the organization’s competitive advantage, core competency or capability? 1 Finance Does the investment in the operation or asset yield a return that is greater than the cost of invested capital? 2 Performance Is the operating performance of the operation or asset (quality of output, cost and cycle time) measurably superior to relevant industry standards? 3
    8. 8. Present Scenario - Growth in BPO Exports Growth in IT Exports Contribution to GDP Employment Creation $ in Bn % Strong Growth setting the stage for India’s Global Leadership $ in Bn % of GDP Source: Nasscom, Analyst Reports, TCS-GCP Research
    9. 9. Future Growth Prospects <ul><li>Revenues estimated at $25 billion by 2012. </li></ul><ul><li>Directly employ 2 million people. </li></ul><ul><li>Industry would comprise 2.5 percent of India's GDP. </li></ul><ul><li>Expansion to Tier-II and Tier-III cities. </li></ul>
    10. 10. Competitor Presence: International Source: McKinsey analysis Size of circle corresponds to number of qualified workers <ul><li>Location attractiveness </li></ul><ul><ul><li>Infrastructure </li></ul></ul><ul><ul><ul><li>Communications </li></ul></ul></ul><ul><ul><ul><li>Other basic infrastructure </li></ul></ul></ul><ul><ul><li>Country risks/FDI incentives </li></ul></ul><ul><ul><ul><li>Incentives for investments </li></ul></ul></ul><ul><ul><ul><li>Political environment </li></ul></ul></ul><ul><ul><li>Time-zone attractiveness </li></ul></ul><ul><li>People attractiveness </li></ul><ul><ul><li>Quality, Cost, Qualifications </li></ul></ul><ul><ul><li>Knowledge of English </li></ul></ul>High Low Low High Australia UK Philippines China Mexico Singapore Ireland India Semitransparent circles denote future projections
    11. 11. - - Attractiveness Index for Offshore Location Source: AT Kearney, neoIT Global Leadership of India Relative Analysis of India vs. Others Rank Country Attractiveness Index 1 India 7.12 2 China 5.61 3 Malaysia 5.59 4 Czech Republic 5.58 5 Singapore 5.45 6 Philippines 5.45 7 Brazil 5.44 8 Poland 5.33 9 Hungary 5.29 10 Thailand 5.20 Parameter Rank Labor Pool 1 Education System 1 English Proficiency 1 Cost Advantage 1 Infrastructure 2 Government Support 1 Quality 1 Cultural Compatibility 2 Business Environment 1
    12. 12. India – Presence in BPO Sector <ul><li>Content Development/ Digitisation/ Transcription </li></ul><ul><li>Data entry </li></ul><ul><li>Data conversion </li></ul><ul><li>Medical transcription </li></ul><ul><li>BPO </li></ul><ul><li>Transfer of business process to external service provider </li></ul><ul><li>Enabled by IT and </li></ul><ul><li>Telecom </li></ul><ul><li>Customer Relation Management </li></ul><ul><li>Order processing/customer fulfillment </li></ul><ul><li>Customer support </li></ul><ul><li>Collection follow-up </li></ul><ul><li>Telemarketing </li></ul><ul><li>Finance and Accounting </li></ul><ul><li>Billing </li></ul><ul><li>Receivables reconciliation </li></ul><ul><li>Creditors reconciliation </li></ul><ul><li>Financial accounting </li></ul><ul><li>Transaction processing </li></ul><ul><li>Tax processing </li></ul><ul><li>Claims processing </li></ul><ul><li>Cheque processing </li></ul>
    13. 13. Captive service providers Quality of services, deliverability, Confidentiality GE, e-Serve, WNS, Dell Process specialists Knowledge of process ADP, Exhult, Convergys, Hewitt IT outsourcing companies Specific verticals and outsourcing skills ACS, EDS, CSC Pure BPO vendors Cost advantage and skilled labour Wipro Spectramind, IBM-Daksh, GTL Software companies Cost advantage and process knowledge Infosys, HCL, Mphasis, Satyam Consultants Financial and accounting background Accenture, E&Y, PwC BPO Key BPO Players in India
    14. 14. Current Top 10 Indian players (2008) <ul><li>Genpact </li></ul><ul><li>WNS </li></ul><ul><li>IBM Daksh </li></ul><ul><li>Aditya Birla Minacs </li></ul><ul><li>TCS BPO </li></ul><ul><li>Wipro BPO </li></ul><ul><li>Firstsource Solutions Ltd </li></ul><ul><li>Infosys Technologies Ltd </li></ul><ul><li>HCL BPO </li></ul><ul><li>EXL Service Holdings </li></ul>Nasscom’s top 10 BPO ranking , July 2008
    15. 15. >1 billion people (growing at 1.7% p.a) at least 20 significant languages three urban concentrations in world top ten history of British presence in India <ul><li>2.2 m graduates every year </li></ul><ul><li>100,000 engineering graduates every year </li></ul>Factors of Production…..
    16. 16. Cost <ul><li>Access to highly- qualified skill pool </li></ul><ul><li>Established methodologies and processes for better performance </li></ul><ul><li>Adherence to leading quality practices </li></ul><ul><li>Robust Communication facilities </li></ul>… . Advantage <ul><li>50-75 % cost reduction for offshore process </li></ul><ul><li>Lower labour cost </li></ul><ul><li>Favourable time lag </li></ul><ul><li>24 x 7 service </li></ul><ul><li>Sharper learning curve effect </li></ul>Quality Productivity
    17. 17. <ul><li>Tax holiday under Indian tax law </li></ul><ul><ul><ul><li>STP / EOU - Tax Holiday available up to financial year 2008-09 . </li></ul></ul></ul><ul><ul><ul><li>SEZ - export income exempt from tax for 10 years from the commencement of business </li></ul></ul></ul><ul><ul><ul><ul><li>100% for first five years and 50% for next 5 years </li></ul></ul></ul></ul><ul><ul><li>Specified IT enabled services coupled with condition of exports </li></ul></ul><ul><ul><li>Tax holiday benefits restricted by Tax Authorities in case of geographical expansion of BPO units </li></ul></ul><ul><ul><ul><li>Considered as extension of existing unit </li></ul></ul></ul><ul><ul><ul><li>Date of commencement of new unit for tax holiday considered as that of the original BPO unit. </li></ul></ul></ul>Govt. & Taxation Policy
    18. 18. Location <ul><li>World class captive centers have come up across the country </li></ul><ul><li>Number of third party providers are offering services </li></ul><ul><li>Small providers have mushroomed in smaller towns </li></ul><ul><li>Delhi </li></ul><ul><li>Bombay </li></ul><ul><li>Madras </li></ul>Bangalore <ul><li>Pune </li></ul><ul><li>Gartner Group </li></ul><ul><li>Dell </li></ul><ul><li>GECISl </li></ul><ul><li>American Express </li></ul><ul><li>Bechtel </li></ul><ul><li>WNS </li></ul><ul><li>Efunds </li></ul><ul><li>Hays </li></ul><ul><li>Texas Instruments </li></ul><ul><li>Motorola </li></ul><ul><li>IBM </li></ul><ul><li>Microsoft </li></ul><ul><li>HSBC </li></ul><ul><li>Ford </li></ul><ul><li>SCOPE </li></ul><ul><li>Hyderabad </li></ul><ul><li>Trivandrum </li></ul><ul><li>Ahmedabad </li></ul><ul><li>Concentration of Shared Service Centers </li></ul><ul><li>Concentration of Service providers </li></ul><ul><li>Calcutta </li></ul><ul><li>Chandigarh </li></ul><ul><li>WNS </li></ul>Jaipur
    19. 19. BPO opportunities <ul><ul><li>Billing services </li></ul></ul><ul><ul><li>Accounting transactions </li></ul></ul><ul><ul><li>General accounting </li></ul></ul><ul><ul><li>Tax consulting & compliance </li></ul></ul><ul><ul><li>Risk management </li></ul></ul><ul><ul><li>Financial reporting & analysis </li></ul></ul><ul><ul><li>Financial management </li></ul></ul><ul><ul><li>Benefits administration </li></ul></ul><ul><ul><li>Education and training </li></ul></ul><ul><ul><li>Recruiting and staffing </li></ul></ul><ul><ul><li>Payroll services </li></ul></ul><ul><ul><li>Hiring administration </li></ul></ul><ul><ul><li>Records management </li></ul></ul><ul><ul><li>Other HR services </li></ul></ul><ul><ul><li>Credit/Debit card services </li></ul></ul><ul><ul><li>Cheque processing </li></ul></ul><ul><ul><li>EDI </li></ul></ul><ul><ul><li>Other transaction processing </li></ul></ul><ul><ul><li>Engineering </li></ul></ul><ul><ul><li>Design </li></ul></ul><ul><ul><li>Animation </li></ul></ul><ul><ul><li>Network consultancy and management </li></ul></ul><ul><ul><li>Biotech research </li></ul></ul><ul><ul><li>Tax processing </li></ul></ul><ul><ul><li>Claims processing </li></ul></ul><ul><ul><li>Asset management </li></ul></ul><ul><ul><li>Document management </li></ul></ul><ul><ul><li>Transcription and translation </li></ul></ul><ul><ul><li>Supply chain management </li></ul></ul><ul><ul><li>Procurement </li></ul></ul><ul><ul><li>Database marketing/ customer analysis </li></ul></ul><ul><ul><li>Telesales/ Telemarketing </li></ul></ul><ul><ul><li>Inbound call centre </li></ul></ul><ul><ul><li>Web sales and marketing </li></ul></ul>Customer Care Finance BPO Opportunities HR Payment Services Content Development & Research Supply Chain & Administration
    20. 20. India BPO - Cost Structure Improved ROI through higher asset utilization and lower operating costs At Par 2-2.5 Times 50-60% Lower Developed countries India Capital Costs Asset Utilization Labour Cost
    21. 21. US$ Cost per FTE (Full Time Employee) Overheads Cost ($) Personnel 6,179 G&A Expense 1,000 Telecom 2,328 Property Rentals 847 Depreciation 1,500 TOTAL EXPENSES 11,854
    22. 22. Revenue per Employee Head Amount ($) Sales generated 14054 Taxes 200 Expenses 11854 Profit per employee $2000 For a unit of 10 people Total Profits $20000
    23. 23. Global Business Leaders - Bullish On India ’ s Potential “ India is a developed country as far as intellectual capital is concerned ” “ India can be a major part of Dell ’ s operations and we are looking to capitalize on India ’ s human capital ” “ We are expanding our presence in India to take advantage of the ample R&D talent available ” “ India is handling the most sophisticated projects in the world..I am impressed with the quality of work ” JACK WELCH, GE JOHN CHAMBERS, CISCO MICHAEL DELL, DELL BILL GATES, MICROSOFT
    24. 24. Thank You